BACKGROUND: The number of genes characterized in liver development is steadily increasing, but the origin of liver precursor cells and the molecular control of liver formation remain poorly understood. Existing theories about formation of zebrafish visceral organs emphasize either their budding from the endodermal rod or formation of independent anlage followed by their later fusion, but none of these is completely satisfactory in explaining liver organogenesis in zebrafish. RESULTS: Expression of a gene encoding the retinol binding protein 4 (Rbp4) was analyzed in zebrafish. rbp4, which is expressed mainly in the liver in adults, was shown to be expressed in the yolk syncytial layer (YSL) during early embryogenesis. At 12-16 hpf rbp4 expression was restricted to the ventro-lateral YSL and later expanded to cover the posterior YSL. We demonstrated that rbp4 expression was negatively regulated by Nodal and Hedgehog (Hh) signalling and positively controlled by retinoic acid (RA). Knockdown of Rbp4 in the YSL resulted in shortened yolk extension as well as the formation of two liver buds, which could be due to impaired migration of liver progenitor cells. rbp4 appears also to regulate the extracellular matrix protein Fibronectin1 (Fn1) specifically in the ventro-lateral yolk, indicating a role of Fn1 in liver progenitor migration. Since exocrine pancreas, endocrine pancreas, intestine and heart developed normally in Rbp4 morphants, we suggest that rbp4 expression in the YSL is required only for liver development. CONCLUSION: The characteristic expression pattern of rbp4 suggests that the YSL is patterned despite its syncytial nature. YSL-expressed Rbp4 plays a role in formation of both yolk extension and liver bud, the latter may also require migration of liver progenitor cells.